Light & Wonder, Inc. · ASX:LNW
Light & Wonder — Scientific Games — Debt Investor Presentation (September 2014)
66 slides from Light & Wonder's debt investor presentation, Sep 3, 2014
Slide 1: Scientific Games Corporation Lender Presentation
Scientific Games Corporation Lender Presentation September 3, 2014
Slide 2: Forward-Looking Statements; Additional Notes
2 Forward-Looking Statements; Additional Notes Forward-Looking Statements: Throughout this presentation, Scientific Games Corporation (“Scientific Games,” “SGMS” or the “Company”) makes forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forwar
Slide 3: Non-GAAP Financial Measures
3 Non-GAAP Financial Measures This presentation includes certain financial measures that were not prepared in accordance with generally accepted accounting principles in the United States (GAAP). Combined Revenue, Attributable EBITDA of SGMS, Attributable EBITDA of Bally, Combined Attributable EBITD
Slide 4: Presenters & Agenda
4 Transaction Overview Gaming Business Overview Lottery Business Overview Synergies & Cash Flow Enhancements Financial Overview 1 3 4 6 7 Presenters & Agenda Gavin Isaacs President & CEO Scott Schweinfurth Executive Vice President & CFO Neil Davidson Sr. Vice President, CFO & Treasurer Credit Highli
Slide 5: Transaction Overview
Transaction Overview SCIENTIFIC GAMES
Slide 6: Transaction overview and financing
6 . On August 1, 2014, SGMS announced a definitive agreement to acquire all of the outstanding shares of BYI for $83.30 per share in cash . Transaction value of $5.1 billion (including $1.8 billion of BYI net debt) . 10.4x LTM 6/30/14 BYI Attributable EBITDA of $492 million, excluding anticipated co
Slide 7: Sources & Uses and Combined Capitalization
7 ($ in millions) Anticipated Sources of Funds Amount Cash From BYI / SGMS Balance Sheet $118 Expanded Revolver (to $650) 200 Rolled SGMS Term Loan B 2,289 Incremental Term Loan B 1,735 New Secured Notes 750 Rolled Other SGMS Debt 48 New Senior Unsecured Notes (8-year) 2,200 New Senior Unsecured Not
Slide 8: Transaction Rationale
Transaction Rationale SCIENTIFIC GAMES
Slide 9: Strategic Rationale
9 . Diverse portfolio of products and services with broad global distribution and significant recurring revenue . One-stop-shopping for gaming and lottery customers . Best-in-class product development teams, player research, analytics, business processes and product pipeline . Enhanced international
Slide 10: Combining Complementary Products, Services and Operations
10 Combining Complementary Products, Services and Operations SGMS BYI Instant Lottery Products Design and printing of secure scratch-off instant lottery tickets, marketing support and licensing/loyalty programs Lottery Systems Draw game-based lottery systems, online keno and sports betting systems,
Slide 11: Compelling Financial Rationale
11 Nonrecurring Revenue . Expected to diversify revenue base, expand margins (~940 bps) and accelerate global growth opportunities . Bally brings leading gaming systems and table products businesses (17% of LTM 6/30/14 Combined Revenue) . Significantly enhanced scale enabling realization of supply c
Slide 12: Gaming Business Overview
Gaming Business Overview SCIENTIFIC GAMES
Slide 13: Gaming Product Sales Overview
13 $308 $431 $739 LTM 6/30/14 SGMS BYI Gaming Product Sales Overview Note: U.S. $ in millions. (1) Pro forma for WMS and SHFL acquisitions. (2) Excludes depreciation and amortization for SGMS and excludes amortization related to intangible assets for BYI. (3) Source: Eilers Research, company filings
Slide 14: Gaming Product Sales - Product Pipeline
14 Gaming Product Sales - Product Pipeline ¦ New 3-reel Mechanical Blade machine launched in late March should provide strong growth opportunities ¦ Opens up segment of casino floor for which WMS has not had product to sell for the last few years ¦ 2H 2014 planned ramp up of new themes for the cabin
Slide 15: Gaming Operations Overview
15 Gaming Operations Overview Highlights North America 2Q 2014 Installed Base (3) . SGMS and BYI-owned gaming machines leased to casinos and other gaming operators . Revenue based on a % of coin-in, a % of net win, a fixed daily fee or a combination . Many based on well-recognized gaming entertainme
Slide 16: Gaming Operations – Product Pipeline
16 Gaming Operations – Product Pipeline SGMS BYI ¦ Total installed base of 12,543 units worldwide at 6/30/14 ¦ Lottery expansion opportunities, including New York ¦ Growth opportunities ¦ BYI represents only ~15% of the WAP footprint in the U.S. ¦ 7 new WAP titles including Titanic and the Magic of
Slide 17: Gaming Operations Overview - Product Pipeline
17 . Gamefield 2.0 . 32 inch horizontal screen . New brand . Expected launch in 4Q 2014 . The Flintstones was the most financially successful animated series for 3 decades until “The Simpsons” debuted in 1989 (1) Gaming Operations Overview - Product Pipeline . Utilizes all sound chairs . Expected la
Slide 18: Gaming Systems Overview
18 ¦ BYI systems are the gold standard in the industry ¦ BYI system links various gaming machines on a floor and provides services such as slot monitoring, player tracking, marketing and intelligence technology ¦ Technology allows real-time monitoring of performance and interaction with player (e.g.
Slide 19: Gaming Systems Overview (cont'd)
19 Note: U.S. Dollars in millions, except number of games and $ per game figures. (1) Source – Eilers Research, LLC Reports. IGT, Konami and Other units are estimated. Aristocrat units are for U.S. and Canada while IGT, BYI and Konami are worldwide. 0 50 100 150 200 250 300 350 CY04 CY05 CY06 CY07 C
Slide 20: Utilities Overview
20 ¦ Utility products for table games: ¦ Increase speed of play; higher player turnover ¦ Enhanced security ¦ Includes card shufflers, roulette chip sorters, shoes and deck checkers ¦ Fastest growth is in Asia (1) $85 $97 $109 $108 61% 62% 63% 61% 0% 20% 40% 60% 80% $0 $50 $100 $150 $200 CY11A CY12A
Slide 21: Proprietary Table Games Overview
21 ¦ Games for which BYI owns or licenses intellectual property ¦ 99% of revenue is recurring in nature ¦ Higher house advantage than public domain games ¦ High volatility creates player appeal for premium payouts on high hands ¦ More than 30 relevant brands ¦ Progressive/add-on upgrades ¦ Only ~25%
Slide 22: Electronic Table Systems Overview
22 703 723 978 1,111 $19,451 $18,201 $17,182 $16,147 $0 $3,000 $6,000 $9,000 $12,000 $15,000 $18,000 $21,000 0 200 400 600 800 1,000 1,200 CY11A CY12A CY13A LTM 6/30/14 New Units Sold Avg. Sales Price ¦ Table games offered on a gaming machine with or without a live dealer ¦ Reported in both gaming s
Slide 23: Social Gaming Overview
23 ¦ On July 1, 2014, BYI acquired Dragonplay, a leading online social casino company that develops and publishes social games for smartphones and Facebook ¦ Portfolio includes Live Hold'em Pro, Wild Bingo, Dragonplay Slots and Farm Slots ¦ Adds table games to the social games portfolio ¦ Unique tab
Slide 24: Real-Money Interactive Gaming Overview
24 $7 $15 $18 $2 $5 $7 $3 $9 $20 $25 89% 85% 82% 79% 0% 20% 40% 60% 80% 100% $0 $5 $10 $15 $20 $25 $30 $35 $40 CY11A CY12A CY13A LTM 6/30/14 SGMS BYI Revenue less Cost of Revenue % ¦ The content provider portion of real-money gaming is a ~$400mm industry and is growing at ~15% CAGR (1) ¦ Integration
Slide 25: Lottery Business Overview
Lottery Business Overview SCIENTIFIC GAMES
Slide 26: Global Lottery Industry Overview
26 $28 $30 $30 $30 $31 $32 $35 $37 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Global Lottery Industry Overview €13 €17 €19 €21 €21 €23 €22 €22 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 $23 $22 $22 $22 $23 $23 $24 $25 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 1.4% 6.1% 3.2% 4.9% 4.4% 4.0% FY12 FY13 FY14E FY
Slide 27: Instant Products Overview
27 Instant Products Overview . Large global industry: ~$80 billion of instant games sold at retail worldwide annually (1) . A leading worldwide instant lottery game provider, serving 38 of the 44 U.S. jurisdictions that sell instant lottery games and ~50 countries . Five highly sophisticated, secure
Slide 28: Lottery Systems Overview
28 Lottery Systems Overview . ~$180 billion global draw-based game annual sales (1) . A leading supplier of lottery systems, technology and terminals . 13 U.S. systems contracts (2) . ~200,000 lottery retailer terminals installed globally Revenue Revenue Less Cost of Revenue (3) $230 $253 $261 $276
Slide 29: Lottery Pipeline
29 Lottery Pipeline . In April, the Multi-State Lottery Association announced MONOPOLY™ Millionaire’s Club by SGMS was selected as a new national premium draw game with an associated national TV game show . Scheduled to launch in October 2014 followed by TV game show scheduled to start in spring 201
Slide 30: Credit Highlights
Credit Highlights SCIENTIFIC GAMES
Slide 31: Credit Highlights
31 Credit Highlights A Leading Global Gaming and Lottery Company Significantly Enhanced Scale and Diversification Lottery, Gaming Operations, Gaming Systems & Table Product Businesses Have Significant Recurring Revenue Clearly Identified Anticipated Synergies and Integration Plan Backed by Recent Su
Slide 32: A Leading Global Gaming and Lottery Company
32 $2,089 $1,007 $515 $492 $230 $329 $58 $18 $2,319 $1,335 $573 $510 $462 $451 $330 $253 $110 $91 $79 $25 GTK-IT + IGT SGMS + BYI SGMS BYI Amaya Novo ALL--+V INLOT MGAM Konami Ainsworth Pollard 50.4% 44.4% 41.0% 40.0% 37.5% 37.2% 37.0% 35.0% 32.6% 29.0% 13.1% 10.8% MGAM SG + BYI Novomatic Amaya Ains
Slide 33: A Leading Global Gaming and Lottery Company
33 A Leading Global Gaming and Lottery Company Instant Tickets Lottery Systems Slots WAP Gaming Systems Utility Products Proprietary Table Games Electronic Table Systems Real Money Online Gaming Social Gaming Combined company would be the most diversified gaming and lottery company in the world 1 P
Slide 34: Significantly Enhanced Scale and Diversification
34 26% 25% 18% 11% 9% 6% 5% Gaming Operations Gaming Machines Sales Instant Products Gaming Systems Lottery Systems Table Products Interactive 30% 32% 24% 12% 2% SGMS BYI 23% 19% 17% 8% 33% Combined SGMS + BYI Significantly Enhanced Scale and Diversification 2 Revenue: ~$1.6 billion (1) Revenue: ~$1
Slide 35: Significant Recurring Revenue
35 Lottery, Gaming Operations, Gaming Systems & Table Product Businesses Have Significant Recurring Revenue . Lottery Systems: U.S. contracts generally are for a minimum of 5-year terms and typically contain multiple renewal options that generally have been exercised by lotteries in the past . Insta
Slide 36: Clearly Identified Anticipated Synergies and Integration Plan
36 ~$175 ~$220 Year 1 Year 2 20.2% 32.8% 35.0% 44.4% 66% 19% 15% SG&A R&D COGS (1) Amounts pro forma for WMS acquisition. Standalone SGMS Attributable EBITDA margin reflects realization of $58 million of remaining cost synergies anticipated from the WMS acquisition. Combined Attributable EBITDA Marg
Slide 37: Enhanced Organic Growth Opportunities
37 Enhanced Organic Growth Opportunities 5 1 2 3 4 5 Cross-selling: Cross-distribution of WMS, SGMS, BYI and SHFL content across multiple sectors Game Content: BYI titles used in SGMS products and across platforms (online, lottery, mobile) and vice versa IP & Licensed Brands: Cross-utilization of ea
Slide 38: Strong FCF Generation and Commitment to Meaningful Deleveraging
38 515 894 397 492 329 25 (24) (349) (50) (18) (497) $1,007 (374) $894 $397 LTM 6/30/14 Combined Attributable EBITDA Anticipated Synergies and Other Adjustments EBITDA from Equity Investments Net of Cash From Equity Investments Combined CapEx Working Capital Estimate Combined Cash Taxes Cash Flow Av
Slide 39: Strong Management Team
39 Gavin Isaacs President and Chief Executive Officer . CEO of SHFL entertainment from April 2011 to November 2013 . EVP and COO of Bally from 2006 to 2011 . Previous executive leadership experience at Aristocrat Scott Schweinfurth Executive Vice President and CFO . Prior to joining SGMS in 2013, wa
Slide 40: Synergies & Cash Flow Enhancements
Synergies & Cash Flow Enhancements
Slide 41: Integration Team with Strong Track Record of Exceeding Synergy Targets
41 Integration Team with Strong Track Record of Exceeding Synergy Targets . ~$100 million estimate of cost synergies by end of 2015 confirmed . $80 million of cost savings anticipated in 2014, well ahead of $50 million originally anticipated . 304 position eliminations yielding $27 million of saving
Slide 42: Highly Achievable Cost Synergies Plan
42 Highly Achievable Cost Synergies Plan 125 144 32 43 18 33 ~$175 ~$220 Year 1 Year 2 SG&A R&D COGS COGS 2% SG&A 68% R&D 30% COGS 31% SG&A 63% R&D 6% ~$220 million of anticipated cost synergies (~11% of Combined Costs (1)) with ~80% expected to be achieved in year 1 $122 million $98 million Note: U
Slide 43: Cost Synergies Analysis
43 Cost Synergies Analysis Anticipated Synergies as % of Combined Costs (1) Costs as % of Revenue Average of Comparable SGMS/BYI Transactions COGS 3% 10% - 20% SG&A 20% 20% - 35% R&D 13% 20% - 35% Relatively conservative synergy assumptions with upside potential BYI (2) IGT (3) SG&A 29% 22% R&D 11%
Slide 44: Cost Synergies Plan - SG&A
44 Highly Achievable Cost Synergies Plan - SG&A Headcount . Plan to reduce combined SG&A headcount by 21% . Majority of headcount reduction expected from redundant backoffice functions . 57% of anticipated SG&A synergies Duplicative Costs . Plan to eliminate duplicative expenses (e.g., professional
Slide 45: Cost Synergies Plan - R&D
45 $144 $43 $33 $220 SG&A R&D COGS R&D . Plan to select one operating system and standardize inside of gaming machines, unify control sub-system and cabinet design architecture, etc. . 89% expected to be headcount related India . Plan to continue to move more of the systems group offshore to low-cos
Slide 46: Cost Synergies Plan - COGS
46 Manufacturing Consolidation . Plan to consolidate all new and remanufacturing production . Plan to apply WMS' successful high-level assembly sourcing strategy to Bally . 46% of anticipated COGS synergies Direct Material Spend Savings . Plan to leverage strategic sourcing and platform engineering
Slide 47: Anticipated Capex Savings
47 Anticipated Capex Savings . Gaming Operations Capex Savings: . Anticipated gaming operations capex savings is driven by enhanced manufacturing efficiencies and unit assumptions . Manufacturing efficiencies are expected to yield savings on Gamefield, Blade and Wave units . Property, Plant & Equipm
Slide 48: Anticipated One-Time Integration Costs
48 Anticipated One-Time Integration Costs Anticipated Costs to Achieve Anticipated Synergies: $76 million for EBITDA Synergies $40 million for Capex Synergies . Headcount: $40mm . Non-Headcount: $2mm . Facilities: $5mm . Capex: $20mm . Headcount: $15mm . Non-Headcount: $2mm . Facilities: $5mm . Cape
Slide 49: Financial Overview
Financial Overview SCIENTIFIC GAMES
Slide 50: SGMS Financial Performance - Revenue
50 (1) SGMS Financial Performance Note: U.S. Dollars in millions. (1) Amounts reflect SGMS’ publicly reported revenue (excluding WMS contribution for the periods prior to October 18, 2013). (2) Amounts reflect SGMS’ revenue pro forma for WMS acquisition and BYI’s revenue pro forma for SHFL and Drago
Slide 51: SGMS Financial Performance - Attributable EBITDA
51 (1) SGMS Financial Performance Note: U.S. Dollars in millions. (1) Amounts reflect SGMS’ publicly reported Attributable EBITDA (excluding WMS contribution for the periods prior to October 18, 2013). Note that SGMS’ definition of publicly reported Attributable EBITDA was modified to some extent in
Slide 52: 2Q 2014 Business Line Update
52 2Q 2014 Business Line Update Gaming Product Sales (1) Gaming Operations (1) $65 $43 $61 $62 $126 $105 2Q CY13 2Q CY14 SGMS BYI $126 $81 $119 $120 $245 $201 2Q CY13 2Q CY14 SGMS BYI . SGMS and BYI revenue on a combined basis declined 2% y-o-y in a challenging 2Q 2014 . 2H14 expected to benefit fro
Slide 53: 2Q 2014 Business Line Update - Systems, Table Products, Interactive
53 $58 $53 2Q CY13 2Q CY14 $41 $42 2Q CY13 2Q CY14 2Q 2014 Business Line Update Systems $73 $74 2Q CY13 2Q CY14 $24 $32 $6 $8 $30 $40 2Q CY13 2Q CY14 $16 $21 $4 $5 $20 $26 2Q CY13 2Q CY14 $28 $31 2Q CY13 2Q CY14 . Systems revenue increased 2% y-o-y in 2Q 2014 . Revenue increased due to several large
Slide 54: 2Q 2014 Business Line Update - Lottery
54 $64 $69 2Q CY13 2Q CY14 SGMS 2Q 2014 Business Line Update Instant Products Lottery Systems $56 $64 2Q CY13 2Q CY14 SGMS $130 $139 2Q CY13 2Q CY14 SGMS . Lottery systems revenue increased 8% y-o-y in 2Q14 . Revenue increased due to higher sports betting service revenue from international customers
Slide 55: Combined Revenue and Attributable EBITDA
55 Note: U.S. Dollars in millions. (1) SGMS revenue pro forma for WMS acquisition. BYI revenue pro forma for SHFL and Dragonplay acquisitions. 58 18 220 33 $515 $492 $329 $1,335 Unrealized WMS Synergies Unrealized SHFL Synergies Unrealized BYI Synergies Certain Accounting Adj. $3,007 $1,371 $1,636 (
Slide 56: Liquidity Profile and Pro Forma Debt Maturity Profile
56 $350 $2,162 $1,632 -- $250 $200 $450 $300 $750 $21 $48 $48 $48 $948 $46 $2,479 $2,732 $2,200 $500 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Liquidity Profile Pro Forma Revolver Combined Calculation 6/30/2014 $49 Revolver Commitment $650 Less: Expected Drawn Amount (200) Less: Letters
Slide 57: Indicative Terms and Timeline
Indicative Terms and Timeline
Slide 58: Incremental Senior Secured Credit Facilities Anticipated Terms
58 Incremental Senior Secured Credit Facilities Anticipated Terms Borrower Scientific Games International, Inc. Facility Incremental Revolving Credit Facility Incremental Term Loan B2 Amount Up to $350 million $1,735 million Guarantors & Security Same as the existing credit agreement Maturity Octobe
Slide 59: Amendment Anticipated Terms
59 Amendment Anticipated Terms Borrower Scientific Games International, Inc. Facility Existing Senior Secured Credit Facilities Amount $300 million Revolving Credit Facility $2,289 million Term Loan B Maturity October 18, 2018 (unchanged) October 18, 2020 (unchanged) Amendment Request. Amend all ite
Slide 60: Transaction Timeline
Transaction Timeline September 2014 Sun Mon Tue Wed Thu Fri Sat 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Holiday Denotes Key Dates Date: Key Process Event Sep 3rd: Lender Meeting Sep 5th: Distribute Credit Agreement / Amendment Documentation Sep 10th: Amendmen
Slide 61: Public Lender Q&A
Public Lender Q&A SCIENTIFIC GAMES
Slide 62: Appendix
Appendix SCIENTIFIC GAMES
Slide 63: Post-Closing Organizational Structure
63 Post-Closing Organizational Structure Guarantors Borrower / Issuer Scientific Games Corporation (NASDAQ: SGMS) Foreign Subsidiaries Foreign Subsidiaries Domestic Subsidiaries Foreign Subsidiaries Domestic Subsidiaries $650mm Revolver $2,289mm Existing TLB1 $1,735mm Incr. TLB2 $750mm New Sr. Sec.
Slide 64: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in millions) (unaudited) SGMS Reported LTM ended June 30, 2014 (unaudited) WMS Three months + 18 days ended October 18, 2013 Pro forma and other adjustments (unaudited) SGMS Pro forma LTM ended June 30, 2014 (unaudited) BYI Reported LTM ended June 30, 2014 (unaudited) SHFL
Slide 65: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in millions) (unaudited) SGMS Reported LTM ended June 30, 2014 (unaudited) WMS Three months + 18 days ended October 18, 2013 Pro forma and other adjustments (unaudited) SGMS Pro forma LTM ended June 30, 2014 (unaudited) BYI Reported LTM ended June 30, 2014 (unaudited) SHFL
Slide 66: Non-GAAP Financial Measures
66 Non-GAAP Financial Measures Scientific Games’ management uses non-GAAP financial measures (such as Attributable EBITDA, FCF and EBITDA from Equity Investments) in conjunction with GAAP financial measures to, among other things: (i) monitor and evaluate the performance of Scientific Games’ busines
Scientific Games — Debt Investor Presentation (September 2014) on 6ix